Category: Tribunal News: Part A-Domestic Taxation

75. Bando (India) (P.) Ltd. vs. DCIT

[2024] 114 ITR(T) 275 (Delhi – Trib.)

ITA NO.: 7743 (DEL) OF 2018

A.Y.: 2014-15

Date of Order: 11^th July, 2024

Sec. 43A: Where the assessee claimed expenses on account of foreign exchange fluctuation, which were merely reinstatement of losses as per accounting standards and there was no actual payment or remittance, section 43A could not apply.

FACTS

During the year the assessee had claimed losses on account of foreign exchange fluctuation of ₹6,42,33,238/-. The AO had disallowed amount of ₹4,20,57,880/- u/s 37(1) treating exchange fluctuation as capital expenditure on account of ECB loan being utilized for purpose of acquiring capital asset which had enduring benefit. Aggrieved by the order, the assessee was in appeal before CIT(A). The CIT(A) in its order sustained the disallowance by invoking the provisions of section 43A instead of section 37 invoked by the AO.

Aggrieved, the assessee filed an appeal before the Tribunal –

HELD

The ITAT observed that the assessee had reinstated income or loss from fluctuation of currency as per accounting standards AS11 and the assessee was regularly following the same system of accounting in the previous years and subsequent years.

The ITAT observed that disallowance u/s 37 and u/s 43A of the Act, both operate in different spheres. Section 43A is a deeming provision for adding or deducting, the fluctuation loss or profit, from the cost of asset whereas disallowance u/s 37 was however for the reasons that capital expenditures are specifically disallowed.

The ITAT held that there was no ground to invoke section 43A since there was merely reinstatement of losses on account of fluctuation in foreign exchange currency and there was no actual payment or remittance. The ITAT following the concept of consistency, allowed the losses claimed for foreign exchange fluctuation.

The appeal of the assessee was accordingly allowed.

BCAJ Admin

74. ITO vs. Shree Banke Bihari Infracon (P.)Ltd.

[2024] 115ITR(T) 223(Raipur – Trib.)

ITA NO.:95 (RPR) OF 2020

CO.: 8(RPR) OF 2023

AY.: 2013-14

Date of Order: 18^th March, 2024

Sec. 68: Where the assessee company had placed on record with the AO supporting documentary evidence substantiating the authenticity of its claim of having received share application money from the investor company, viz. confirmation, bank statement, copies of the return of income, financial statements of the investor company, copy of share application forms, copy of PAN, copy of memorandum and articles of association, copy of board resolution and return of allotment in Form No.2, though notice u/s 133(6) was not complied with by the investor company, the AO on the said standalone basis could not draw adverse inferences in the hands of the assessee company for addition u/s 68 in respect of share capital and share premium.

FACTS

The assessee company was engaged in the business of real estate and building work. The assessee company had e-filed its return of income on 21^st December, 2013 declaring a total income of ₹229,982/-. The assessee company’s case was selected for scrutiny proceedings u/s 143(2) of the Act.

During the course of assessment proceedings, it was observed that the assessee company had claimed to have received share capital and share premium of ₹2.05 crores from M/s. Modakpriya Merchandise Pvt. Ltd [the investor company].

The AO had issued notices u/s 142(1) of the Act which was returned unserved by postal authority. The A.O. sought for a direction from the Jt. CIT, Range-4, Raipur, and under his direction issued a commission u/s. 131(1)(d) of the Act. The A.O. directed his Inspector to carry out a spot verification about the existence of the investor company at its old address. The Inspector vide his report dated 23^rd March, 2016 informed the A.O. that the investor company was neither available at the address that was provided to him nor any board evidencing the availability of the investor company was found at the said address.

The AO observed that the assessee company had failed to discharge the onus that was cast upon it as regards proving the authenticity of its claim, the identity of the investor company was not established and except for the aforesaid transaction of payment made towards share capital / premium, the bank account of the investor company revealed no other transaction.

Accordingly, the AO being of the view that the assessee company in the garb of share capital/premium had laundered its unaccounted money, thus, made an addition of the entire amount of Rs.2.05 crore (approx.) u/s. 68 of the Act. Aggrieved by the order, the assessee company filed an appeal before the CIT(A).

The CIT(A) observed that the inquiry was done on the back of the assessee company and results of enquiry were not confronted to the assessee before making the addition. The CIT(A) further observed that the AO made inquiry at wrong address of Synagogue Street Kolkata instead of correct address of Mango Lane, Kolkata. The CIT(A) observed that the availability of the investor company could not be gathered by the AO for the reason that the necessary inquiries were carried out at an incorrect address, i.e., the old address of the assessee company. It was also observed that the ARs were attending hearing before the AO and AO could have very well informed the result of the inquiry across the table to the AR. All the documents in respect of M/s Modakpriya Merchandise Pvt. Ltd. such as ITR, audited balance sheet, bank account statement, ROC certificate were furnished. It was observed by CIT(A) that the investment of ₹2.05 crore made by the investor company with the assessee company was sourced from the sale of its investments, and complete details of the same were filed with the AO. Without finding any fault in the documents furnished by the appellant, no adverse finding can be made by the AO.

The CIT(A) observed that the assessee had discharged its onus to prove the existence of the investor company, genuineness of the transaction and the creditworthiness of the investor company and thus, deleted the addition made by the AO.

The revenue being aggrieved with the order of the CIT(Appeals) filed an appeal before the ITAT.

HELD

The ITAT observed that the investor company had shifted from its old address “Synagogue Street, Kolkata” to its new address: “3, Mango Lane, 4th Floor, Kolkata(WB)-700 001”, however, the spot verification was carried out at its old address. The ROC records of the investor company also revealed its new address. The AO himself on Page 3 of his order had referred to the new address of the investor company. In spite of the above facts, the AO drew the adverse inference about the unavailability of the investor company at its old address and doubted the genuineness of the transactions. The ITAT did not approve the adverse inferences drawn by the AO.

The ITAT observed that the department had accepted the investment of ₹39.99 lacs (approx.) made by the investor company with M/s. Rupandham Steel Pvt. Ltd. during A.Y.2017-18, vide its order u/s. 143(3) dated 31^st December, 2019 while framing the assessment for A.Y 2017-18 of M/s. Rupandham Steel Pvt. Ltd. and thus it dispels all doubts about the existence of the investor company.

The ITAT further observed that the AO had issued notice u/s. 133(6) of the Act at the new address of the investor company but it had carried out necessary verifications at its old address. The ITAT held that though notice u/s 133(6) was not complied with, the AO on the said standalone basis could not draw adverse inferences in the hands of the assessee company.

The ITAT observed that the assessee company had placed on record with the AO supporting documentary evidence substantiating the authenticity of its claim of having received share application money from the investor company, viz. confirmation of the investor company, bank statement, copies of the return of income, financial statements of the investor company, copy of share application forms, copy of PAN, copy of memorandum and articles of association, copy of board resolution and return of allotment in Form No. 2. The ITAT also observed that on a perusal of the bank account of the investor company, the amount remitted to the assessee company as an investment towards share application money was not preceded by any cash deposits in the said bank account but is sourced from bank transfers made through RTGS and had filed the confirmations of the source of RTGS as well.

The ITAT held that the assessee company had discharged the double facet onus that was cast upon it as regards proving the authenticity of its claim of having received genuine share application money from the investor company –

i by substantiating based on documentary evidence the “nature” and “source” of the amount so credited in its books of account, i.e. receipt of the share application money from the investor company; and

ii by coming forth with a duly substantiated explanation about the “nature” and “source” of the sum so credited in the name of the investor company, as per the mandate of the “1st proviso” to Section 68 of the Act.

In the result, the appeal of the revenue was dismissed.

BCAJ Admin

73. (2025) 170 taxmann.com 198 (IndoreTrib)

Aruva Foundation vs. CIT

ITA No.: 398 & 399(Ind) of 2024

A.Y.: N.A.

Date of Order: 11^th December, 2024

S. 12AB–CIT(E) cannot deny registration under section 12AB on the ground that some of the objects of the applicant-trust had an element of commerciality.

FACTS

The assessee-company was incorporated under section 8 of the Companies Act, 2013 with the objects of, inter alia, selling and marketing of products developed by the weaker sections of the society. It was granted provisional registration / approval under section 12AB and section 80G. Subsequently, it applied to CIT(E) for grant of final registration / approval under section 12AB as well as section 80G.

CIT(E) rejected assessee’s application under section 12ABon the ground that some of the objects of the assessee as mentioned in the Memorandum of Association clearly showed that its intention was to carry out various commercial activities and also to engage in trading of various products and therefore, it was not eligible to obtain registration under section 12AB. He also rejected the application under section 80G on the ground that as a consequence of denial of registration under section 12AB, approval under section 80G was not available to the assessee. Further, the said application was also belated.

Aggrieved, the assessee filed appeals before ITAT.

HELD

The Tribunal observed that-

(a) Proviso to section 2(15) defining ‘charitable purpose itself allows commerciality in the activities of assessee but up to a ceiling limit of 20 per cent. Further, section 11(4A) grants exemption to commercial or business activity on fulfillment of certain requirements.

(b) Section 13(8) also provides that the exemption under section 11/12 shall be denied in that previous year only in which the proviso to section 2(15) is violated. Therefore, these provisions of law clearly show that even if any object or activity of assessee, out of various multiple objects and activities, has element of commerciality, that would result in denial of exemption under section 11/12 to that extent and in that particular previous year only; but the CIT(E) in exercise of power under section 12AB cannot deny registration to assessee.

(c) It was also a fact that the assessee had done only charitable activities till date and had not undertaken any activity contemplated under the said “commercial” objects. Therefore, as and when the said activity was actually undertaken by assessee in future, it would be a prerogative of Assessing Officer in that particular year, to ascertain the quantum of exemption under section 11/12 available to assessee.

In the result, the appeal of the assessee was allowed and CIT(E) was directed to grant registration under section 12AB.

With regard to the approval under section 80G, the Tribunal observed that the assessee had already filed a fresh application to CIT(E) within the extended timeline of 30.6.2024 [as extended by Circular No. 7/2024 dated 25.04.2024] and therefore, remitted the matter back to the file of CIT(E) for an appropriate adjudication.

BCAJ Admin

72. K M Educational & Rural-development Trust vs. ITO

(2024) 169 taxmann.com 617(Chennai Trib)

ITA No.: 1326(Chny) of 2024

A.Y.: 2018-19

Date of Order: 4^th December, 2024

S. 12A–If the charitable institution had filed its return of income belatedly but within time allowed under section 139(4), then the tax department must allow exemption under section 11.

FACTS

The assessee-trust was registered under section 12A. For AY 2018-19, it filed its return of income belatedly on 30^th November, 2018 [due date for filing of return under section 139(1) was 30^th September, 2018] declaring total income of ₹NIL and claimed a refund of ₹1,96,656. While processing the return of income under section 143(1), the Central Processing Centre (CPC) did not allow the exemption under section 11 on the ground that the return of income / audit report was not filed within the due date under section 139(1).

On appeal, CIT(A) upheld the action of CPC.

Aggrieved, the assessee filed an appeal before ITAT.

HELD

Citing CBDT Circular No.F.No.173/193/2019-ITA-I dated 23^rd April, 2019 the Tribunal held that CPC and CIT(A)erred in restricting the time limit for filing return of income to the due date under
section 139(1) and therefore, if the assessee had filed its return of income within the time allowed under section 139, that is, even if it is filed belatedly, then CPC was required to allow the exemption under section 11 by rectifying its intimation under section 143(1)(a).

Accordingly, the Tribunal allowed the appeal of the assessee and restored the issue back to the file of CIT(A) with a direction to pass rectification order as required vide CBDT Circular dated 23^rd April, 2019(supra).

BCAJ Admin

71. VidjayaneDurairaj -VidjayaneVelradjou vs. ITO

(2024) 169 taxmann.com 625 (ChennaiTrib)

ITA No.:1457 (Chny) of 2024

A.Y.: 2012-13

Date of Order: 4^th December, 2024

S. 54F–Deduction under section 54F is allowable to the assessee even if the new residential property was purchased by him in the name of his wife.

FACTS

During FY 2011-12, the assessee sold three immovable properties for consideration of ₹50,40,000 and received the sale proceeds in cash. Out of the sale proceeds, he had deposited ₹19,75,000 into his own bank account and an amount of ₹36,00,000 in his wife’s bank account. Thereafter, a residential property was purchased in the assessee’s wife’s name for ₹44,27,994. The assessee did not file his return of income for AY 2012-13.

Vide notice under section 148 dated 27th March, 2018, the Assessing Officer (AO) reopened the assessment on the ground that he had received information from ITS Data that the assessee had deposited cash into his UCO Bank account to the tune of ₹19,75,000. In response thereto, the assessee filed his return of income claiming deduction of ₹44,27,994 under section 54F being capital gain invested into residential property purchased in his wife’s name. The AO did not allow the claim of deduction under section 54F on the ground that the residential property in question was purchased in the name of the assessee’s wife who was also assessed to tax separately and not in the assessee’s name.

The assessee preferred an appeal before CIT(A) who dismissed the same citing the decision of Punjab and Haryana High Court in Kamal Kant Kamboj vs. ITO, (2017) 88 taxmann.com 541 (Punjab & Haryana).

Aggrieved with the order of CIT(A), the assessee filed an appeal before ITAT.

HELD

The Tribunal noted that the predominant judicial view is that for the purpose of section 54F, new residential house need not be purchased by the assessee in his own name and therefore, following the decision of jurisdictional High Court in erred in CIT vs. V. Natarajan,(2006) 154 Taxman399/287 ITR 271 (Madras), the Tribunal directed the AO to allow deduction under section 54F to the assessee.

BCAJ Admin

70. Bishwanath Prasad vs. CIT(A)

ITA Nos. 163 to 166/Patna/2023

A.Ys. : 2017-18 to 2020-21

Date of Order: 29^th August, 2024

Sections: 270A, 270AA

Penalty levied under section 270A deleted where the assessee having fulfilled the conditions for grant of immunity from levy of penalty u/s 270AA of the Act made a belated application under section 270AA and no opportunity was given to the assessee as also no order passed by the AO rejecting the assessee’s application.

FACTS

All the appeals were against orders passed under section 270A of the Act levying penalty for under-reporting of income. The facts in each of the years under appeal being the same, the Tribunal considered the facts in the case of Nand Kumar Prasad Sah for assessment year 2017-18 and apply the decision to all other appeals.

The assessee, an individual, filed return of income under section 139(1), for AY 2017-18, declaring total income of ₹8,35,425. Subsequently, consequent to search conducted at the business premises of the assessee, the assessee in response to a notice issued under section 153A of the Act filed the return of income declaring therein a total income of ₹13,97,271. The assessment of the assessee for AY 2017-18 stood abated.

The Assessing Officer (AO) completed the assessment under section 153A of the Act by accepting the income returned in response to notice issued under section 153A of the Act. The AO levied penalty with reference to the difference between income assessed under section 153A and the income declared in return of income filed under section 139(1).

The assessee belatedly filed an application under section 270AA for grant of immunity from levy of penalty and initiation of prosecution. The AO rejected the application and levied a penalty of ₹6,20,495.

Aggrieved, the assessee preferred an appeal to CIT(A) claiming that since returned income has been assessed there is no under-reporting under section 270A(2) of the Act. It was also argued that the AO ought to have considered the application for grant of immunity. The CIT(A) dismissed the contentions and confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal before the Tribunal where two-fold arguments were raised viz. relying on decision of Delhi High Court in PCIT vs. Neeraj Jindal [(2017) 399 ITR 1] it was contended that once the assessee is subjected to search and notice u/s 153A of the Act is issued for furnishing the return and the assessee furnished return since the return filed originally gets abated and become non-est. Therefore, since there is no difference between the returned income and assessed income, no penalty is leviable u/s 270A of the Act. Second fold of the arguments was that the AO erred in rejecting the assessee’s application for grant of immunity without granting an opportunity of being heard which is contrary to the principles of natural justice. Relying on the decision of the Madras HC in Natarajan Anand Kumar vs. DCIT [(2024) 159 taxmann.com 637 (Mad)] it was contended that the ratio of the said decision squarely applies to the present case and that the AO ought to have condoned the delay in furnishing application under section 270AA because the assessee satisfied all the conditions required to be satisfied for grant of immunity.

HELD

The Tribunal observed that there is no difference between the income returned under section 153A and assessed income. The Tribunal examined the second fold of the arguments first viz. that the case of the assessee was covered by the decision of the Madras High Court in Natarajan Anand Kumar (supra) and therefore the AO ought to have condoned the delay and granted immunity.

The Tribunal noted that there was no tax and interest payable as per assessment order passed under section 143(3) r.w.s. 153A and assessee had not preferred any appeal against the order of assessment. The application for grant of immunity is required to be filed within one month from the end of the month in which the assessment order is received. Assuming that the assessment order is received by the assessee on the very same date of its passing viz. 31^st March, 2022 there is a delay of 45 days in filing an application for grant of immunity. The application of the assessee has been rejected without providing any opportunity of being heard.

The Tribunal observed that –

i) the Madras High Court has in Natarajan Anand Kumar (supra) dealt with almost identical issue and held that it was a fit case to condone the delay of 30 days in filing the application for grant of immunity. The Court condoned the delay;

ii) the Delhi High Court in the case of Ultimate Infratech Private Limited v. National Faceless Assessment Centre in WP 6305/2022 dated 20^th April, 2022 where the Court has held that upon satisfaction of the conditions mentioned in section 270AA the assessee acquires a right to be granted immunity under section 270AA;

iii) the Rajasthan High Court in GR Infraprojects Ltd. vs. ACIT [(2024) 158 taxmann.com 80] has held that “Sub-section (4) of section 270AA provides that the Assessing Officer shall pass an order accepting or rejecting any application filed by the assessee seeking immunity from imposition of penalty under section 270A within a period of one month from the end of month in which the application under sub-section (1) is received.

The Tribunal held that the ratio laid down in the above decisions is squarely applicable in favour of the assessee and therefore, it was of the considered view since, the assessee has fulfilled the conditions for grant of immunity from levy of penalty u/s 270AA of the Act, the actions of the AO levying penalty u/s 270A of the Act, is not justified because firstly, no opportunity was given to the assessee and secondly, no order has been passed by the AO rejecting the assessee’s application.

The Tribunal held the case of the assessee to be a fit case for immunity of penalty u/s 270AA of the Act and on this ground itself deleted the impugned penalty. In view of the decision of the Tribunal on the second fold of the arguments of the assessee, the Tribunal held that the first fold of the arguments became academic in nature. The penalty levied by AO and confirmed by the CIT(A) was deleted and the appeals filed by the assessee were allowed.

BCAJ Admin

69. SiwanaAgri Marketing Ltd. v. ACIT

ITA No. 1094/Ahd./2024

A.Y.: 2017-18

Date of Order: 27^th November, 2024

Section: 36(1)(iii)

Where Revenue has failed to establish direct nexus between the borrowed funds and interest-free advances, the presumption is that the interest-free advances have been made out of interest-free funds available with the assessee.

FACTS

For A.Y. 2017-18, the assessee filed its return of income declaring a total income of ₹31,91,560. While assessing the total income of the assessee under section 143(3) of the Act, the Assessing Officer (AO) disallowed ₹65,86,200 under section 36(1)(iii) of the Act on the ground that the assessee had advanced interest-free loans of ₹5.48 crore while incurring significant interest expenses on unsecured borrowings. He held that the assessee failed to demonstrate the nexus of these advances with interest-free funds and did not demonstrate any business purpose.

Aggrieved, the assessee preferred an appeal to CIT(A) contending that interest-free advances were made out of sufficient interest-free funds available with it. The CIT(A) held that the assessee failed to substantiate its claims with adequate evidence or satisfy the legal requirements under the Act. He observed that no fund flow statement or evidence provided to establish the nexus of interest-free funds with advances and that business purpose or commercial expediency has not been demonstrated. He confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal where on behalf of the assessee, on the basis of financial statements it was contended that the assessee has sufficient own funds. The net worth as on 31^st March, 2016 was ₹30.31 crore and that on 31^st March, 2017 was ₹27.11 crore whereas the amount of loan given during the year is only ₹15.75 lakh and the balance is all opening balances. It was also pointed out that no disallowance was made in earlier years despite the existence of similar advances of ₹5.33 crore and assessee has earned net interest income of ₹1.10 crore during the year thereby negating any suspicion of diversion of interest-bearing funds. Reliance was placed on decision of SC in CIT(LTU) vs. Reliance Industries Ltd. [(2019) 410 ITR 466]. It was contended that the reliance placed by AO and CIT(A) on the decision of S A Builders [Appeal (civil) 5811 of 2006 (SC)] was misplaced in light of later SC ruling in Reliance Industries Ltd. (supra).

HELD

The Tribunal, based on material on record, held that had sufficient interest-free funds amounting to ₹27.10 crores as on 31^st March, 2017, which were more than adequate to cover the interest-free advances of ₹5.48 crores. It observed that the CIT(A) did not address the assessee’s submission that no disallowance was made in earlier years despite similar advances. The principle of consistency was disregarded. The CIT(A)’s emphasis on the absence of a fund flow statement is unjustified, as the assessee’s financial statements clearly indicated the sufficiency of interest-free funds and the CIT(A)’s reliance on S.A. Builders vs. CIT (supra) is misplaced.

The Tribunal held that while the decision in the case of S A Builders (supra) emphasizes the requirement of commercial expediency, the principles laid down in CIT vs. Reliance Industries Ltd. (supra), a subsequent decision of the Supreme Court clarifies that where sufficient interest-free funds are available, the presumption arises that such advances are made from those funds. Following the principle established in CIT vs. Reliance Industries Ltd. (supra), it is presumed that such advances are made from interest-free funds. The Revenue has failed to establish a direct nexus between borrowed funds and these advances. Therefore, the disallowance of interest expenses under Section 36(1)(iii) of the Act cannot be sustained.

BCAJ Admin

68. J K Associates vs. ITO

ITA No. 1200/Ahd./2024

A.Y.: 2017-18

Date of Order: 5^th December, 2024

Sections: 68, 69A

Where funds were introduced by the partners of the firm as their capital contribution and their confirmations filed, the onus cast on the assessee stood discharged. If the AO is not satisfied with the explanation then the addition may be made in the hands of the partners but not in the hands of the assessee firm.

FACTS

For the assessment year 2017-18, the Assessing Officer (AO) received information that the assessee firm had purchased immovable property of ₹1 crore in Financial Year 2016-17. Since the assessee firm had not filed return of income, he recorded reasons and issued a notice under section 147 of the Act and completed the assessment by making an addition of ₹1 crore in respect of unexplained investment in immovable property.

Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal where on behalf of the assessee it was submitted that the source of investment in the immovable property was duly explained by the assessee before the AO as well as before the Ld. CIT(A). It was submitted that the property was acquired out of capital contribution made by 12 partners of the firms and the details of amount contributed by the individual partners along with their confirmations was filed before the AO. It was further explained that the partners had made withdrawals from other firms as well as taken loan from other entities for making capital contribution to the assessee firm. Therefore, the identity, genuineness and creditworthiness of the partner’s contribution towards the acquisition of property was duly established. Therefore, the AO was not correct in making an addition in the hands of the assessee firm. Relying on the decision of the Gujarat High Court in PCIT vs. VaishnodeviRefoils&Solvex [(2018) 89 taxman.com 80(Gujrat] it was submitted that in case the AO was not satisfied with the explanation of the assessee, then the addition should have been made in the hands of the individual partners but not in the case of assessee firm.

HELD

The AO was not correct in rejecting the evidences filed by the assessee as self-serving documents. The assessee has discharged its onus by explaining the source of investment made in the immovable property. It is not that the amounts were borrowed by the assessee from 3rd parties; rather all the fund had come from its own 12 partners in the form of their capital contribution. The assessee had discharged its onus to explain the source of investment in the immovable property. The confirmation of the partners was also filed in this regard. If the AO was not satisfied about the creditworthiness of the partners, then the enquiry was required to be made at the end of the partners. No addition in respect of unexplained capital contribution made by the partner can be made in the hands of the firm. The Tribunal held that the assessee had discharged its onus to explain the source of investment in the immovable property.

The addition of ₹1 crore made by the AO in respect of unexplained investment in property was deleted.

BCAJ Admin

67. Dipak Parmar vs. ITO

ITA No. 178/Srt./2024

A.Y.: 2017-18

Date of Order: 19^th November, 2024

Section: 69A

Credit card dues settled / paid in cash, qualify for addition u/s 69A if the source of cash deposit is not explained.

FACTS

For A.Y. 2017-18, the assessee filed his return of income declaring total income at ₹2,78,400/-. The assessee had made cash payment towards credit card purchases of ₹6,16,142/-. The Assessing Officer ( ‘AO’) asked the assessee to explain the source of the above cash payments. The AO also issued show cause notice which was not replied to by the assessee. Therefore, the AO held that the amount of cash payment of ₹6,16,000/- remained unexplained and constitutes income of the assessee u/s 69A of the Act which is taxable at the rates mentioned in section 115BBE of the Act.

Aggrieved, the assessee preferred an appeal to the CIT(A) who issued seven notices which were not responded neither were any written submissions filed. The CIT(A) concluded that the assessee was not interested in pursuing the appeal and therefore decided the same based on material on record.

The CIT(A) observed that assessee failed to explain the source of cash payment of ₹6,16,000/- towards credit card purchases; hence, the impugned amount constitutes income in the hands of the assessee u/s 69A of the Act. The CIT(A) also relied on the order of Hon’ble Punjab & Haryana High Court, in case of Anil Goel vs. CIT, 306 ITR 212 (P& H) wherein relying on the earlier decision of the High Court in case of Popular Engineer Co. vs. ITAT, 248 ITR 577 (P & H), it was held that elaborate reasons need not be recorded by the CIT(A) as has been done by the AO. The reasons are required to be clear and explicit indicating that the authority has considered the issue in controversy. If the appellate / revisional authority has to affirm such an order, it is not required to give separate reasons, which may be required incase the order is to be reversed by the appellate / revisional authority.

Aggrieved, the assessee preferred an appeal to the Tribunal where none appeared on behalf of the assessee and therefore the appeal was decided ex-parte.

HELD

The Tribunal noted that the assessee had made cash payments for credit card purchases i.e. ₹3,37,650/- with RBL Bank Ltd., ₹1,66,492/- with SBI Cards and Payment Services Pvt. Ltd. and ₹1,12,000/- with City Bank. It observed that both AO and CIT(A) issued several notices but assessee chose not to respond to the notices nor file any written submission. Having observed that the provisions of section 69A are clear, the Tribunal held that in the present case, assessee has purchased the credit cards by making cash payments. It is, therefore, clear that assessee was owner of money (cash) which was used to make credit card purchases. However, he has not explained the nature and source of acquisition of such money, being cash, of ₹6,16,142/-. The AO has added the same u/s 69A of the Act due to non-compliance by assessee to the statutory notices as well as the show cause  notice. The CIT(A) has rightly confirmed the addition because assessee did not attend before him or filed any written submission in support of the grounds raised before him.

The Tribunal upheld the order of CIT(A) holding that the provisions of section 69A are clearly attracted to the facts of the case.

BCAJ Admin

57 M/s. Ariff & Company vs. ACIT

ITA No.: 140 / Chny/ 2022

A.Y.: 2007–08

Date of Order: 15th December, 2023

Section: 36(1)(iii)

Where the firm had borrowed a loan from the bank and raised fresh capital from the incoming partner to settle the debt / capital account of retiring partners, any interest paid on such loan / capital account is allowable under section 36(1)(iii).

FACTS

Mr R along with his wife and three children constituted the assessee-partnership firm in 1974, which carried on business of running a hotel called “Hotel President”.

Four partners decided to retire from the firm because they were migrating to the USA, leaving the management completely in the hands of Mr A.

Accordingly, after negotiations, the firm was reconstituted in 2006 with the retirement of four partners and the induction of a new partner, Mrs A.

Before reconstitution of the firm, the assets and liabilities of the firm were revalued and credited in the capital account of partners, and the capital account of the outgoing partners was treated as debt of the partnership firm.

To settle outgoing partners’ capital account, the firm borrowed a loan from Punjab National Bank and paid interest thereon. It had also taken capital contribution from incoming partner, Mrs A and paid interest to her in accordance with section 40(b).

The AO disallowed the interest paid by the assessee-firm to the capital account of partners and on loan borrowed from the Bank on the ground that payment to outgoing partners was nothing but a family settlement.

The disallowance was upheld by CIT(A).

Aggrieved, the assessee filed an appeal before the Tribunal.

HELD

The Tribunal observed as follows:

(a) interest paid on capital account of partners partakes the nature of funds borrowed for the purpose of business of the assessee, and consequently, interest paid thereon is allowable under section 36(1)(iii);

(b) any loan borrowed for the purpose of settling outgoing partners’ capital account which has been treated as debt in the books of accounts of the firm assumes the character of loan borrowed for the purpose of business of the assessee, and consequently, interest paid on borrowed capital account is allowable under section 36(1)(iii);

(c) when the assets were owned by the partnership firm, any settlement of such assets to the outgoing partners cannot be considered as settlement of family property, just because the partners were family members.

(d) merely because the assets of the firm had been revalued before reconstitution of partnership firm (to ascertain the fair market value of assets of the firm and shares of the outgoing partners), it cannot be a reason for the AO to treat the settlement of firm properties among partners as settlement of family property.

In the result, the appeal filed by the assessee was allowed.

BCAJ Admin

56 Tata Sons Pvt. Ltd. vs. DCIT

ITA No.: 2362 / Mum / 2023

A.Y.: 1993–94

Date of Order: 6th December, 2023

Section: 244A

Interest under section 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left, if any, should be adjusted towards the tax component.

FACTS

The return of income of the assessee for A.Y. 1993–94 was filed on 31st December, 1993, returning NIL income.

The return was subject to assessment / re-assessment and rectification over a period of time.

Tribunal, through orders dated 4th February, 2015, and 1st January, 2016, gave relief to the assessee.

The AO passed an order giving effect (OGE) dated 8th March, 2016, granting the refund of ₹30,45,62,594, and the assessee received the said refund on 18th August, 2022.

Aggrieved by the short credit of interest on refund, the assessee filed an appeal before CIT(A) / NFAC.

The CIT(A) / NFAC held against the assessee.

Aggrieved, the assessee filed an appeal before the Tribunal, alleging that:

(a) The AO had incorrectly adjusted the earlier refunds, resulting in a short credit of interest of ₹9,93,09,258;

(b) The AO had not calculated the interest for the interim period from when OGE was passed, that is, 8th March, 2016, and the actual receipt of refund, that is, 18th August, 2022, resulting in short credit of interest of ₹11,27,21,927.

(c) The AO had not calculated the interest under section 244A(1A), which led to interest short credit of ₹7,09,13,871.

HELD

Dealing with each of the grievances, the Tribunal held as follows:

(a) The amount of interest under section 244A is to be calculated by first adjusting the amount of refund already granted towards the interest component and balance left, if any, shall be adjusted towards the tax component; accordingly, the assessee would be entitled for interest on the unpaid refunds in accordance with the principle laid out in Grasim Industries Ltd vs. DCIT (2021) 123 taxmann.com 312(Mum);

(b) In light of the issue being squarely covered in favour of the assessee in CIT vs. Pfizer Limited (1991) 191 ITR 626 (Bom), City Bank NA Mumbai vs. CIT, ITA No. 6 of 2001 and CIT vs. K.E.C International in ITA No. 1038 of 2000 (Bom HC), the assessee was justified in seeking interest under section 244A up to the date of receipt of the refund order, i.e. 18th August, 2022;

(c) Applying the ratio laid down by coordinate bench in ACIT vs. Bharat Petroleum Corporation Ltd, ITA No. 5231 to 5233 of 2019, section 244A(1A) would be applicable in assessee’s case from 1st June, 2016, till the date of actual receipt of refund.

Accordingly, the Tribunal directed the AO to recompute the interest on refund in accordance with the order and as per law.

BCAJ Admin

55 Amala Jyothi Vidya Kendra Trust vs. PCIT

ITA Nos.: 458 / Bang / 2023

A.Y.: 2021–22

Date of Order: 1st December, 2023

Section: 12AB(4)

In the absence of express mention to operate retrospectively, no retrospective cancellation for earlier years can be done under the amended section 12AB(4) introduced with effect from 1st April, 2022.

FACTS

The assessee-trust was registered vide trust deed dated 1st April, 2005.

It was registered under the erstwhile section 12AA. Due to the amended provisions with effect from 1st April, 2021, requiring re-registration, the assessee filed an application for registration under section 12A / 12AB, which was granted to it by DIT from A.Y. 2022–23 to A.Y. 2026–27.

On 28th December, 2021, a search was carried out under section 132 in the office premises of assessee-trust in Bangalore.

During the course of search, various incriminating materials were found which were confronted to the trustees and secretary of the assessee-trust, and it was found that they were using the funds of the trust for personal benefit.

Consequently, assessment proceedings were initiated by the AO for A.Y. 2021–22, calling for various details and confronting the evidence collected during the search.

Subsequently, vide letter dated 20th December, 2022, the AO sent a reference to PCIT for A.Y. 2021–22 communicating her satisfaction as per second proviso to section 143(3) of the Act that this was a fit case for cancellation of registration under section 12AB.

Accordingly, on 28th December, 2022, show cause notice was issued by the PCIT requiring the assessee-trust to explain as to why the registration granted to it should not be cancelled under section 12AB.

After considering the reply, the PCIT, invoking the amended provisions of section 12AB(4)(ii) [introduced by the Finance Act, 2022 w.e.f. 1st April, 2022], cancelled the registration granted to the assessee-trust w.e.f. A.Y. 2020–21 and that of subsequent years.

Aggrieved by this, the assessee-trust filed an appeal before the ITAT.

HELD

The Tribunal observed that:

(a) In income-tax matters, law to be applied is the law in force in the assessment year unless otherwise stated or implied. In the present case, the PCIT cancelled the registration granted under section 12AA/12AB w.e.f. previous year 2020–21 relevant to assessment year 2021–22 and therefore, the law as stated in the A.Y. 2021–22 is to be applied and not the law as stood in A.Y. 2022–23;

(b) No retrospective cancellation could be made under section 12AB(4)(ii) since it has not been provided or is seen to have explicitly provided to have a retrospective character or intended. Therefore, without a specific mention of the amended provisions to operate retrospectively, no cancellation for the earlier years could be made;

(c) Since the PCIT invoked section 12AB(4)(ii) which has been introduced by the Finance Act, 2022 w.e.f. 1st April, 2022, so as to cancel the registration with retrospective effect from A.Y. 2021–22, such order is bad in law and deserved to be quashed.

The Tribunal also noted that the same view has been taken by Mumbai ITAT in the case of Heard Foundation of India, ITA No.1524/Mum/2023 vide order dated 27th July, 2023.

In the result, the appeal of the assessee-trust was allowed.

BCAJ Admin

54 Lalit Kumar Kalwar vs. Income-tax Officer

[2023] 106 ITR(T) 373 (Jaipur – Trib.)

ITA No.: 379 (JP) OF 2018

A.Y.: 2013–14

Date of Order: 30th May, 2023

Section 54F, read with sections 48 and 50C — Where entire actual sales consideration had been invested in purchase and construction of residential house by assessee, capital gain would be exempt under section 54F and provisions of section 50C would not be applicable.

FACTS

The assessee had sold shops and received actual sale consideration of ₹12 lakhs, which was less than the value accepted by the DLC of ₹20.78 lakhs. The assessee claimed long term capital gain (LTCG) at nil after seeking exemption under section 54F, contending that the entire actual sale consideration was invested in the purchase and construction of the residential house.

The Assessing Officer (AO) disallowed the claim of the assessee for the reason that the assessee had not deposited the sale consideration received on transfer of the property in capital gain account as per provisions of section 54F(4).

Aggrieved, the assessee filed the appeal before the CIT(A). The CIT (A) also upheld the order of the AO.

Aggrieved, the assessee filed an appeal before the ITAT.

HELD

After analysing the provisions of S. 54F(1) of the Act, the ITAT found that in Explanation to S. 54F(1), the term “net consideration” means the full value of consideration received or accruing as a result of the transfer of the capital asset as reduced by any expenditure incurred wholly and exclusively in connection with such transfer. The meaning of full value of consideration in Explanation to S. 54F(1) was not to be governed by the meaning of words “full value of consideration” as mentioned in S. 50C.

The ITAT also held that the fiction under S. 50C of the Act is extended only to the aspect of computation of capital gains and the same does not extend to the charging section or the exemptions to the charging section. The legislature consciously intended to apply the fiction under S. 50C of the Act only to the expression used in S. 48 of the Act and not in any other place. The ITAT further observed that the cost of new asset was not less than the net consideration, and thus, the whole of the capital gains was not to be charged even if the capital gains had been computed by adopting the value adopted by stamp registration authority. The requirement of law is that net consideration is required to be appropriated towards the purchase of the new asset. Thus, deduction under S. 54F was clearly applicable.

In result, the appeal filed by the assessee was allowed.

BCAJ Admin

53 Deepak Setia vs. Deputy Commissioner of Income-tax

[2023] 106 ITR(T) 125 (Amritsar – Trib.)ITA NO. 112 (ASR.) OF 2023

A.Y.: 2019–20

Date of Order: 17th June, 2023

S.69A r.w.s. 115BBE — Conversion of Miscellaneous business income into other sources by invoking provisions of section 69A without any evidence and taxing such income at special rate as per section 115BBE was improper.

FACTS

A survey was conducted on the assessee’s premises u/s 133A. The assessee surrendered the amount of ₹29 lakhs and offered it for taxation as business income. Subsequently, the case was selected for scrutiny and out of ₹29 lakhs, amount of ₹14.23 lakhs which was related to miscellaneous business income (MBI) was taken as income from an undisclosed source under section 69A, and tax was calculated as per section 115BBE at a special rate. The rest of the surrendered amount was taken as normal business income, and tax was calculated at normal rate.

Aggrieved, the assessee filed the appeal before the CIT(A). The CIT(A) also upheld the order of the AO.

Aggrieved by the CIT(A) order, the assessee filed an appeal before the ITAT.

HELD

The ITAT observed that during survey proceedings, the assessee had surrendered total income of ₹29 lakhs out of which amounted to ₹14.23 lakhs related to other discrepancies / MBI, which was treated as income from undisclosed source u/s 69A and tax thereon was calculated as per section 115BBE at special rate during assessment. The entire addition was certainly without forming proper basis for conversion of business income to non-business income. The revenue was not able to submit any evidence during assessment and appeal proceeding that the said income was not connected with the business income of the assessee or was accumulated from a non-recognising source.

The ITAT held that when all the incomes earned by the assessee were only from the business income of the assessee, there did not arise any question as to the application of provisions of section 69A by following the settled principle that “when there is no other / separate source of income identified during the course of survey or during the course of assessment proceedings, any income arising to the assessee shall be treated to be out of the normal business of the assessee only”.

The ITAT had relied on the following Judicial precedents:

1. Harish Sharma vs. ITO [IT Appeal No. 327 (Chd.) of 2020, dated 11th May, 2021]

2. Daulatram Rawatmull vs. CIT [1967] 64 ITR 593 (Cal.)

3. Mansfield & Sons vs. CIT [1963] 48 ITR 254 (Cal.)

4. Sham Jewellers vs. Dy. CIT [IT Appeal No. 375 (Chd.) of 2022, dated 22nd August, 2022]

The ITAT held that the conversion of business income into other income and application of section 69A was bad and illegal and accordingly, levy of tax u/s 115BBE on the business income was liable to be quashed.

In result, the appeal filed by the assessee was allowed.

BCAJ Admin

52 Arun Manohar Pathak vs. ACIT

[2023] 106 ITR(T) 14 (Mumbai – Trib.)

ITA NO.: 489 (MUM.) of 2023

A.Y.: 2017–18

Date of Order: 24th May, 2023

S. 69A – Where there was a huge amount available with assessee in form of cash which he had deposited during demonetization, it could not be presumed that cash deposited by assessee was out of some undisclosed source without any adverse material.

FACTS

The assessee was carrying on the milk distribution business. He deposited cash of a certain amount in his bank account during the demonetization period in old currency notes, i.e. specified bank notes (SBNs). The assessee submitted that he was a retailer of milk and the said cash deposits in SBNs were out of collection from sale of milk to persons during the demonetization period, and the same had been used to make payment towards purchase of milk to Gujarat Co-operative Milk Marketing Ltd. (GCMM) by way of demand drafts as reflected in the bank statement of the assessee. However, the Assessing Officer (AO) treated cash deposited in the bank during the demonetisation period in SBNs as unexplained and added the same under section 69A of the IT act.

Aggrieved, the assessee filed an appeal before the CIT(A). The CIT(A) upheld the order of the AO on the grounds that the assessee was not able to show that he was entitled to claim benefit of Notification No. S.O. 3408(E), issued by the Ministry of Finance (Department of Economic Affairs), dated 8th November, 2016, as the assessee had not filed any material to establish that the assessee qualifies as a milk booth operator under authorisation of Central or State Government.

Aggrieved by the CIT(A) order, the assessee filed an appeal before the ITAT.

HELD

The ITAT observed that the assessee had placed on record all the documents which supported the averments made by the assessee before the AO and CIT(A). The assessee had submitted the following documentary evidences to substantiate that he was carrying out milk distribution services and, therefore, was entitled to claim benefit of the notification:

1. Copy of License No. 11512018000623 issued by Government of Maharashtra.

2. Cash book, bank book and bank statement of the assessee.

3. Ledger Account of purchases made from GCMM.

Upon perusal of documents / details on record, the ITAT held that the assessee was able to substantiate the stand during the assessment proceedings, and the burden of proof was on the Revenue.

The ITAT observed that the CIT(A) had not dealt with the documents / details furnished by the assessee and failed to either carry out any inquiry / verification into purchase / sale of milk by the assessee to controvert the averments made by the assessee, or to point out any infirmity in the aforesaid documents / details.

The ITAT held that AO as well as CIT(A) were incorrect in holding that the assessee was not covered by the notification. Even if for the sake of arguments, it is believed that though the assessee was not covered by the aforesaid notification, the assessee had a bona fide belief that the assessee was entitled to the benefit of the notification, and therefore, permitted to receive SBNs, and that the assessee did accept SBNs as valid tender.

The ITAT held that the averments made by the assessee, supported by the documents furnished, went uncontroverted and, accordingly, deleted the addition made under section 69A of the act.

In result, the appeal filed by the assessee was allowed.

BCAJ Admin

51 D.C. POLYESTER LIMITED vs. DCIT

2023 (10) TMI 971 – ITAT MUMBAI

A.Y.: 2017–18

Date of Order: 17th October, 2023

Section: 270A

When income is offered for taxation under the head ‘Income from House Property’ but the income is assessed under the head ‘profits and gains of business or profession’, it cannot be said that the assessee has suppressed or under-reported any income.

Where the assessee offered an explanation as to why it reported rental income under the head ‘income from house property’ and the explanation of the assessee was not found to be false, the case would be covered by section 270A(6)(a).

FACTS

The assessee filed its return of income declaring total income to be a loss of ₹72,200. In the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee had offered rental income of ₹29,60,000 under the head ‘income from house property’. The AO noticed that the assessee had declared the rental income from the very same property under the head ‘income from business’ in an earlier year, i.e., in A.Y. 2013–14. However, in the instant year, the assessee had declared rental income under the head ‘income from house property’ and also claimed various other expenses against its business income. He further noticed that there was no business income during the year under consideration.

The assessee submitted that it has reduced its business substantially and all the expenses claimed in the profit and loss accounts are related to the business only. It was submitted that the rental income was rightly offered under the head ‘income from house property’ during the year under consideration. In the alternative, the assessee submitted that it will not object to assessing rental income under the head ‘income from business’. Accordingly, the AO assessed the rental income under the head ‘income from business’.

The AO assessed rental income under the head ‘business’ and consequently, the assessee was not entitled to deduction under section 24(a) of the Act. This resulted in assessed income being greater than returned income.

The AO initiated proceedings for levy of penalty under section 270A. In the course of penalty proceedings, it was submitted that the assessee has not under-reported the income since the addition pertains only to statutory deduction under section 24(a). The AO held that the furnishing of inaccurate particulars of income would have gone undetected, if the return of income of the assessee was not taken up for scrutiny. He also took the view that the claim of statutory deduction as well as expenses in the Profit and Loss account under two different heads of income would tantamount to under-reporting of income under section 270A of the Act. The AO levied a penalty of ₹1,83,550 under section 270A of the Act.

Aggrieved, the assessee preferred an appeal to the CIT(A), who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

The Tribunal observed that since section 270A of the Act uses the expression “the Assessing Officer ‘may direct’”, there is merit in the contention of the assessee that levying of penalty is not automatic, and discretion is given to the AO not to initiate penalty proceedings under section 270A of the Act.

It held that it is not a case that the assessee has suppressed or under-reported any income. The addition came to be made to the total income returned by the assessee, due to change in the head of income, i.e., the addition has arisen on account of computational methodology prescribed in the Act. It held that, in its view, this kind of addition will not give rise to under-reporting of income. The Tribunal was of the view that the AO should have exercised his discretion not to initiate penalty proceedings u/s 270A of the Act in the facts and circumstances of the case.

The Tribunal observed that the assessee has offered an explanation as to why it reported the rental income under the head ‘income from house property’ and the said explanation is not found to be false. Accordingly, it held that the case of the assessee is covered by clause (a) of sub-section (6) of section 270A of the Act. The Tribunal noted that the Chennai bench of Tribunal has in the case of S Saroja [2023 (5) TMI 1262 – ITAT CHENNAI] held that a bonafide mistake committed while computing total income, the penalty u/s 270A of the Act should not be levied.

The Tribunal deleted the penalty levied under section 270A of the Act.

BCAJ Admin

50 Rekha Singh vs. ITO

ITA No. 2406/Mum/2023

A.Y.: 2015–16

Date of Order: 30th October, 2023

Section: 56(2)(vii)(b)

Proviso to section 56(2)(vii)(b) providing for considering stamp duty value on the date of agreement applies even in a case where a part of the consideration was paid by the co-owner, and not by the assessee, on or before the date of the agreement.

FACTS

The assessee, an individual, filed a return of income declaring therein a total income of ₹5,93,520 on 27th August, 2015. The case was subjected to limited scrutiny. In the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee has purchased an immovable property for a consideration of ₹84,15,300 as a co-owner jointly with her husband. The consideration was paid by both co-owners. The assessee was a co-owner for the property being 50 per cent share. The AO noticed that while the consideration was ₹84,15,300 whereas the value of property determined by the stamp valuation authority was ₹1,32,82,000. The AO was of the view that section 56(2)(vii)(b) was to be applied.

The assessee explained that as per the proviso to section 56(2)(vii)(b), the stamp duty value on the date of agreement may be taken for the purpose of this clause. It was explained that the date of agreement (letter of allotment) was 16th December, 2010, whereas the purchase deed was registered on 29th December, 2014, and the first payment of R1 lakh was paid through a banking channel on 18th October, 2010, by the husband of the assessee.

The AO did not agree with the submission of the assessee and since property was transferred for a consideration less than its stamp duty value, therefore, 50 per cent of the total difference was assessable as income in assessee’s hands.

Aggrieved, the assessee preferred an appeal to the CIT(A) who held that since the initial payment before date of registration was made only by the other co-owner, husband of the assessee, the assessee was not entitled to the benefit of the proviso. He, accordingly, confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal.

HELD

In the course of hearing before the Tribunal, on behalf of the assessee, it was submitted that the property was purchased by the assessee in the joint name of the assessee with her husband, and it is immaterial that the initial consideration was paid by the husband of the assessee who was other co-owner. Reliance was placed on the decision of the co-ordinate bench, Mumbai, in the case of Poonam Ramesh Shahjwanv. ITO(IT) 4(2)(1) A.Y. 2014–15 in ITA No. 2252/Mum/2019 and the decision of ITAT, Pune in the case of Sanjay Dattatrya Dapodikarv. ITO, Ward 6(2) [(2019) 107 taxmann.com 219 (Pune Trib.)].

The Tribunal having perused the decision of ITAT in the case of Poonam Ramesh Shahjwan (supra) wherein on the similar facts, the value of the flat was determined on the date of booking of flat after taking into consideration the payment made by the assessee through banking channel before the registration of the flat as laid down in the proviso to section 56(2)(vii)(b) of the Act. The Tribunal also considered the decision of ITAT, Pune bench in the case of Sanjay Dattatraya Dapodikar (supra) wherein it is held that where the date of agreement for fixing the amount of consideration for purchase of a plot of land and the date of registration of sale deed were different but assessee, prior to date of agreement, had paid a part of consideration by cheque, provisos to section 56(2)(vii)(b) being fulfilled, the stamp value as on date of agreement should be applied for purpose of said section.

The Tribunal directed the AO that the stamp duty value on the date of allotment, in the case of the assessee on 16th October, 2010, be taken for the purpose of section 56(2)(vii)(b) of the Act and not stamp value as on the date of registration of sale deed. Further, the Tribunal did not find any merit in the findings of the CIT(A) that before the registration of the flat only other co-owner, i.e., Ajay Kumar Singh, husband of the assessee has made the payment. Since, it was joint property owned by assessee and her husband, it is immaterial who had made payment before the date of registration of the property.

The Tribunal decided this ground of appeal in favour of the assessee.

BCAJ Admin

49 Ravinder Kumar vs. ITO

ITA No. 2265/Del/2023

A.Y.: 2011–12

Date of Order: 8th November, 2023

Section: 54B

Section 54B deduction is allowable even if agricultural land is purchased in the name of the wife.

FACTS

The assessee sold agricultural land which gave rise to long-term capital gain of ₹12,78,456. The assessee claimed that it had purchased another agricultural land and, therefore, the entire long term capital gain of ₹12,78,456 is exempt under section 54B of the Act. The Assessing Officer (AO) denied the claim for deduction under section 54B on the grounds that the land had been purchased in the name of the wife of the assessee.

Aggrieved, the assessee preferred an appeal to the CIT(A) who confirmed the action of the AO.

Aggrieved, the assessee preferred an appeal to the Tribunal where, on behalf of the assessee, reliance was placed on the decision of Ashok Kumar vs. ITO [ITA No. 7460/Del/2018; AY: 2009–10; Order dated 28th December, 2022] and on behalf of the revenue, reliance was placed on dismissal of SLP by the SC in the case of Bahadur Singh vs. CIT(A) [(2023) 154 taxmann.com 457 (SC)] against the decision of the Punjab & Haryana High Court wherein purchase of agricultural land in the name of the assessee’s wife was not allowed under section 54B relief to the assessee.

HELD

The Tribunal noted the ratio of the decision of the Tribunal in the case of Ashok Kumar (supra). The Tribunal observed that in the decision relied upon by the DR, it was a dismissal of SLP simpliciter by Hon’ble Apex Court against the decision of Hon’ble Punjab & Haryana High Court. The Tribunal noted that dismissal of SLP simpliciter by Hon’ble Supreme Court does not merge the order of Hon’ble High Court with that of Hon’ble Supreme Court. It also noted that there is no jurisdictional High Court decision on this issue. Further, in case of conflicting, Hon’ble High Court decision one in favour of assessee has to be adopted as per Hon’ble Supreme Court decision in Vegetable Products. Accordingly, the Tribunal followed the precedent relied upon by the assessee which also draws support from Hon’ble High Court decisions referred therein.

The Tribunal set aside the order of the Revenue authorities and decided the issue in favour of the assessee.

BCAJ Admin